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1, 5G Commercial development, communication construction, smart terminals, cloud services and other fields, there are periodic opportunities
In 2019, the global 5G mobile network will be commercialized one after another, which will directly stimulate the capital of the communication industry At the same time, it stimulates the demand for connected terminals and paves the way for applications such as AI and cloud computing. We believe that 5G will continue to play the main axis of technology investment in 2020. From the perspective of infrastructure construction, global operators will accelerate mobile network deployment and capital expenditure next year, and it is expected to reach the peak of construction in the next three years. In the field of electronics and computer hardware, in addition to the resumption of growth in mobile Internet terminals, innovative consumer electronics categories are also on the horizon, and the semiconductor industry is expected to recover. Among them, the technology and market share of domestic chip design companies and foundries will continue to increase, bringing Structural opportunities.
1.1, the global 5G has entered the second year of acceleration
293 operators around the world are conducting 5G-related experiments or deploying 5G, and China, the United States and South Korea are leading the speed. According to GSMA data, as of October 2019, 321 operators in 105 countries around the world are participating in 5G networks, an increase of 120 from the end of last year. At present, 62 operators have deployed 5G networks, of which South Korea and the United States started 5G commercial use in April 2019; South Korea, the United States, China, and Japan are in the first echelon of 5G construction, followed by Britain, Germany, and France . According to the plans of global operators, the main commercial use of 5G will begin in 2020.
South Korea currently has the largest number of 5G users, and its average monthly user traffic is 2.6 times that of 4G, and its ARPU has increased by 75%. Since launched 5G services in April 2019, the number of 5G users in South Korea has exceeded 3 million as of the end of September. According to data from the Korea Telecom Department, the average monthly mobile data usage of 5G users reached 24GB in May, 2.6 times that of 4G. For high-speed communication capabilities, local operators have launched 5G services such as professional baseball, VR content, ultra-high-definition video, and VR games. Strategy Analytics pointed out that VR/AR services currently account for 20% of South Korea's 5G traffic. Among the local mobile traffic packages, the average price per GB of 4G is 16,300 won, and 5G is 6,100 won, a drop of 62.6%. ARPU (average revenue per user) reached 73,500 won, an increase of 75% compared to 42,000 won for 4G.
The United States has limited spectrum resources, and the millimeter wave industry chain is not yet mature. The number of 5G base stations and the number of users lag behind South Korea. The communication spectrum in the United States adopts an auction policy. The frequency bands below 6G are mainly occupied by satellites, the government, or the previous 2G/3G/4G, and the cost of clearing the frequency and withdrawing from the network is relatively high, which leads the United States to give priority to the use of millimeter waves (24GHz, 28GHz, 37GHz, etc. ), but because the existing mainstream radio frequency device materials mainly work below 6G, the millimeter wave industry chain is still immature and the price is relatively high.
Taking smartphones as an example, the cost of a non-millimeter-wave 5G RF module is about $12, but Samsung GalaxyS10 5G mmWave RF module costs $55. In addition, the millimeter wave transmission loss is relatively large, the coverage radius of a single station with the same power is small, and the indoor signal will be greatly attenuated. The high cost of millimeter wave 5G network construction limits the progress of 5G construction in the United States, and also leads to the current number of users being far lower than that of South Korea.
1.2, China Unicom and China Telecom Co-construction and sharing, is expected to speed up the pace of construction
5G Driven by 5G, the capital expenditure of global operators in 2022 will reach 355.4 billion US dollars. At present, most developed countries and some developing countries in the world have entered the late stage of 4G construction.The total capital expenditure of global operators is almost no longer growing. According to the forecast of OVUM, with the expansion of 5G construction scale, the capital expenditure of global operators will return to growth, reaching 355.4 billion US dollars in 2022. We expect that the global 5G construction will reach its peak in 2022-23, and the number of new 5G base stations will be 2.87/2.88 million.
China's construction is faster than average, and we expect 5G capex to reach 44.2/243.6 billion in 2019/20. According to our calculations, China Mobile needs 1.9 million base stations to build a 5G network with the same coverage as 4G, and China Unicom and China Telecom merged construction. We estimate that 2.35 million stations can achieve the same network coverage as the previous 4G. The three major operators The number of 5G base stations will reach 4.25 million.
We estimate that the three operators will build about 3.6 million 5G base stations by 2024, and the five-year mobile network capital expenditure will be 938.6 billion yuan, an increase of 19.6% compared with the previous 5 years of 4G. Among them, China Unicom and China Telecom are expected to total 532.4 billion yuan, an increase of 51.2% over the 4G period. Although the overall capital expenditure of the co-construction 5G network has decreased, the peak period of construction has been advanced to 2021; at the same time, it will help operators' cash flow, and the overall industry development will be healthier.
1.3 Capital expenditure directly drives the performance of the communication industry chain
China’s 5G construction is mainly based on sub-6G, and millimeter wave will be applied to some special scenarios. my country's spectrum allocation system can carry out low-frequency re-cultivation, gradually withdraw the previous 2G/3G network, integrate spectrum resources and re-build 4G or even 5G in low-frequency, good transmission characteristics of low-frequency signals, and mature industries for corresponding devices The chain will save the cost of network construction. The millimeter-wave technology for high-frequency signals (26GHz-75GHz) has a low spectrum occupancy rate, but the cost of large-bandwidth, high-frequency devices has increased significantly, and the large signal transmission loss also requires an increase in base station density. Planning, it may be applied to scenarios with large data volumes in the future.
⚫ On the base station side of the mobile communication network
The volume and price of radio frequency devices are rising. In 2023, the market size of the radio frequency front-end on the base station side will reach 5.8 billion US dollars. The AAU (antenna + RF front-end unit) of 5G, assuming 64TR (64 transmit and receive channels), will be configured with 64 filters , 64 LNAs and PAs, 64 switches, 32 duplexers and 16 ADs /DA, the total price is estimated at 10,531 yuan according to the current quotation, while the price of a mature 4G single-band antenna is only 1,400 yuan.
estimates the market size of base station RF front-ends, assuming that 5G covers hotspot areas first, and 64TRAAU products account for about 80%, and then deploy them in areas with low population density, the requirements for the number of transceiver channels and RF devices will decrease, and the proportion of 64TR will decrease 60% by 2023, while the price of radio frequency devices will gradually decrease. In addition, it is assumed that most of the newly built 4G base stations are 8TR products, and 5G small base stations will be built in batches from 2021. We predict that the global base station side RF front-end market will reach a peak value of US$5.80 billion in 2023, with a five-year CAGR of 34.1%.
Power amplifiers: material upgrades lead to price jumps; mobile terminals are still dominated by gallium arsenide GaAs, and on the base station side, gallium nitride GaN is expected to gradually replace LDMOS. The technology of power amplifiers is mainly divided into three types: LDMOS (Lateral Diffusion Metal Oxide Semiconductor), GaAs (Gallium Arsenide) and GaN (Gallium Nitride). At present, the power of LDMOS amplifier is relatively large, but the operating frequency is low (below 3.5GHz), so it is suitable for 3G/4G base stations. Although GaAs can work at frequencies below 40GHz, the output power is relatively small, so it is suitable for low-power scenarios such as terminal equipment.
Because 5G will adopt higher communication frequency (Sub 6G frequency band such as 3.5GHz, 4.9GHz, and even future millimeter waves such as 26GHz and 28GHz), LDMOS technology can no longer meet the amplification requirements of 5G base stations, while GaN can achieve greater output power and higher operating frequency, and can work at 40GHz frequency, It is applied in the field of 5G macro base station/small base station and satellite communication, but the cost of related components has also increased significantly.
filter: Domestic manufacturers are in the catching-up stage and have the opportunity to expand their share in mature categories, and the conversion rate of dielectric filters is expected to gradually increase. surface acoustic wave filter (Surface Acustic Wave, SAW) is a relatively mature filter. With the increase of frequency and precision requirements, the design direction of the device is turned to new devices such as bulk acoustic wave (BAW). At present, due to the large size of domestic filters, they cannot meet the trend of modularization of mobile phone RF front-end integration. However, in GSM, 2G or 3G low-frequency communications, as mainstream manufacturers shift their focus to the 4G and 5G markets of BAW or FBAR filters, leaving market opportunities for SAW filters, the share of new entrants in the industry is expected to increase. The filter used by
on the base station side is a dielectric filter, and the main global suppliers are Murata (Murata) and Kyocera (Kyocera). However, in recent years, the gap between domestic companies and overseas companies has gradually narrowed. Some domestic companies have achieved batch supply (such as Canqin Technology), and some companies will also supply batches in the second half of 2019, including Dafu Technology, Wuhan Fangu . In the future, the proportion of domestic devices is expected to gradually increase.
⚫ Fixed network side
The peak period of domestic 5G network construction is expected to be in 2021, and the market size of optical modules is expected to reach 12.4 billion yuan, of which 25G optical modules account for 84.8%. According to the network construction plan announced by China Mobile, for a spectrum bandwidth of 160MHz, if direct fiber optic connection is used, a macro base station corresponds to 12 optical modules, and if Open-WDM is used, it corresponds to 24 optical modules. For example, China Unicom and China Telecom jointly build and share the 5G network. Since the two companies have allocated a spectrum of 200MHz, the number of optical modules required is also double that of 100MHz. Therefore, the joint construction and sharing will not have much impact on the number of optical modules.
According to the network architecture of the "5G Technology Development White Paper", the ratio of CU (central unit, centralized unit) to DU (distributed unit, distributed unit) to the macro base station is 1:6:48. The connection between one DU and CU requires 4 optical modules, which are 50G/100G. 200G/400G optical modules are required to connect the CU to the aggregation layer and the core network. Based on the number of macro base stations and the forecast of single base station usage, the domestic demand for optical modules for 5G construction is expected to reach a peak of RMB 12.4 billion in 2021, with a CAGR of 127.3% from 2019 to 21; throughout the 5G construction cycle, the scale of the optical module industry is expected to reach RMB 51 billion Yuan Renminbi.
The requirement of SA networking in 2020 will boost the demand for optical fiber and cable, and the price may slowly rise. At present, there is an oversupply in the optical fiber and cable industry (especially optical cable), and the price competition for centralized procurement is fierce. In March 2019, China Mobile's centralized purchase price of optical cables was 54.6-63.5 yuan/core-km (excluding tax), a year-on-year decrease of nearly 50%; China Telecom's centralized purchase price in August was 56.5-69.6 yuan/core-km (not Including tax), slightly higher than that of China Mobile. We expect that the price of optical fiber and cable has bottomed out this year, but it is difficult for the price to rebound quickly in the short term. With the opening of the SA networking mode in 2020, the demand for optical fiber and cable is expected to increase, and the industry's supply-demand relationship and product prices may gradually improve.
⚫ terminal side
5G drive, the downward trend of smartphones is expected to be reversed. According to IDC's forecast in August 2019, global smartphone shipments will decline by 2.2% year-on-year in 2019. From 2020 to 2023, the compound growth rate of global smartphone shipments will be about 2.5%. We judge that whenThe former 5G network has been gradually commercialized. Once the price of smartphones drops to the mainstream price range, consumers will have a wave of replacements; the mainstream models of 5G mobile phones are expected to sink to the price range of 3,000 yuan in Q1-Q2 of 2020. Sales will return to growth.
Chips, radio frequencies, antennas, structural parts, etc. of smart terminals will increase in unit price. For 's initial 5G smartphones, the separate baseband chip is the initial solution, and integration will be the mainstream of next year's products. Among RF devices, filters (compared to 4G, the number is from 5 to 11, the same below), PA (4 to 8), LNA (4 to 8), duplexers (2 to 6), switches (4→10) and other components increase in number, specifications are also upgraded, and the value is about doubled. Similarly, antennas will have increased numbers and material upgrades (such as LCP and MPI antennas). Due to the greater number of antennas and connectors inside the 5G mobile phone, the complexity and cost of the casing structure have also increased.
2. In the second half of the mobile Internet, the scene is sinking in the near view, and the improvement of service types is seen in the distance. still maintained a high growth rate.
1) According to CNNIC data, the number of online shopping users in China reached 639 million in June 2019, with a penetration rate of 75%; among them, the number of mobile online shopping users reached 622 million, with a penetration rate of 73%. With the rise of and pinduoduo and in 2017, the population coverage of e-commerce in low-tier areas continues to rise.
2) At present, the three e-commerce platforms all use low-tier regions as the main source of user growth—in addition to Tencent’s Pinduoduo, there are also Alibaba’s ’s “Juhuasuan”, and JD’s ’s “Jingdong Shopping”. With the large-scale promotional activities of the three platforms on 618, the number of active buyers in 19Q2 continued to rise. We judge that the promotion of the Double 11 event in 19 years will be greater than that of 618; and in 2020, it will still focus on investment, so e-commerce users in low-tier areas will sink still maintained a high growth rate.
The demographic dividend drives the three major e-commerce platforms to continue investing in low-tier areas.
1) We estimate that by the end of 2018, China's e-commerce population will be about 640 million, and we judge that there are at least 320 million e-commerce population dividends in China, including about 70 million people in first- and second-tier cities, and about 250 million people in low-tier areas. Regions are the main source of e-commerce demographic dividends.
2) The huge e-commerce demographic dividend base in low-tier areas ensures its rapid realization: by 2019Q2, Alibaba’s annual active buyers (AAC) reached 674 million (an increase of 20 million compared to 19Q1), and 19Q2 increased its holdings of AAC by 70 % from low-line areas.
The driving force for the development of e-commerce under digitalization - the simplification and integration of the supply chain.
⚫ The improvement of e-commerce platform's digitalization capability has brought about the rise of C2M, which has brought about extreme compression on the supply chain. The improvement of the digital capability of the e-commerce platform is a prerequisite for the rise of the C2M (customer-to-manufacturer) model. The traditional offline retail supply chain model is "manufacturer + brand owner + dealer + retail terminal + consumer", but e-commerce has simplified it to "manufacturer + brand owner + agent operation + logistics + consumer". Under the C2M model, the supply chain is compressed into "manufacturers + logistics + consumers"; Pinduoduo's "new brand plan" is to let manufacturers who have production capacity but lack brands quickly increase sales through C2M.
⚫ The digitization of e-commerce brings a new marketing model, and the e-commerce supply chain reversely promotes production and sales. The e-commerce supply chain reverses the production and sales process and improves the efficiency of production and sales in traditional industries—taking clothing as an example, under the traditional supply chain model, destocking is an important issue; but in "KOL (Key OPInion Leader) + In the "e-commerce" mode, "KOL sample clothing display——reservation—mass production—express delivery" will no longer produce inventory backlogs, which will greatly increase the overall gross profit margin of clothing manufacturers. As long as the production supply chain can keep up, the efficiency of clothing production and sales can be significantly improved—— The business supply chain model reversely promotes the reform of the clothing industry.
2019 and 2020 are high growth periods for e-commerce.
⚫ We estimate that the scale of China’s e-commerce market will reach 18 trillion yuan in 2025, and the CAGR from 2018 to 2025 will be 14.4 %.
1) Assuming a social retail CAGR of 5.8% from 2018 to 2025, the scale of social retail will reach 56,628 billion yuan in 2025, and the scale of physical e-commerce is expected to be 18,019 billion yuan, accounting for 31.8%, of which first-tier/second-tier/low-tier cities The proportion of physical e-commerce in China is 11%/43%/45%, respectively.
2) From the perspective of commodity categories, it is mainly the increase in supplies (71% of the increase), while the increase in food and clothing accounts for 17% and 12%, the core logic behind it is that online shopping of fast moving consumer goods replaces offline, and the penetration rate of online shopping of highly standardized products (3C, home appliances, etc.) Two years of growth.
1) In 2019, e-commerce competition will intensify; Pinduoduo will provide a large amount of subsidies after its successful listing, the penetration rate of e-commerce in low-tier areas will increase, and platform subsidies will increase, making the e-commerce scale increase rapidly. During the period of 618 in 2019, each The GMV of major e-commerce platforms have all achieved substantial growth: According to the data released by the heads of each platform, Tmall’s physical payment GMV during 618 in 2019 increased by 38.5% year-on-year, JD. During the period, the GMV increased by more than 300% year-on-year.
2) We judge that the factors that will increase the GMV of 618 e-commerce in 2019 will continue throughout 2019 (especially Double 11) and 2020, so these two years will be the rapid growth of e-commerce. Two years of growth.
2.2 Media and entertainment: Content is king, there is still room for payment, expand business model
⚫ Video streaming media: High-quality content supply is the key
Global video streaming media: Netflix tops penetration rate, Disney , Apple, HBO and other giants will intensify competition in content. industry giants are making their own efforts on platforms and content, such as ESPN +, a sports streaming service launched in 2018, relying on Fox’s Hulu, and Disney in 2019. streaming Matrix, in addition to WarnerMedia's streaming service platform HBO Max, NBC Universal's "Peacock" will also be launched next year. In addition to traditional media groups, technology leaders such as Apple and Amazon have also stepped into this field.
Domestic: Content supervision policies are becoming stricter, and differentiated high-quality content supply is the key. In recent years, the State Administration of Press, Publication, Radio, Film and Television has issued content guidelines of varying degrees, and has managed actors' remuneration and drama copyrights. The scope of influence has expanded from TV stations to online platforms, and long-form videos have been affected by drama delays. We believe that creating high-quality content and building its own brand will become the core competitiveness of the long video platform, and it will gradually transform from a platform to an integrated media group. For example, Tencent Video, iQiyi are building the entire industry closed loop from IP to game development, distribution, channels, and media.
⚫ Music streaming media: The overseas market is still in the expansion stage, and the domestic music pan-entertainment market is huge
Spotify has a leading share in global music streaming media, and overseas users’ payment habits and copyright protection are ahead of domestic ones, but their profitability is poor. is measured by the number of paying users. As of June 2018, Spotify ranks first in the world, with a market share of 36%, a payment rate of nearly 50%, and 100 million paying users. Apple's music platform AppleMusic has grown rapidly since its launch in 2015 and currently ranks second, with 60 million users. Amazon Music Unlimited (Amazon Music Unlimited) has grown by about 70% in the last year, and has more than 32 million users as of April.
Overseas music streaming platforms have good copyright protection and good user payment habits, and the business model of subscription payment can become the main channel for monetization. However, the market share of overseas copyright owners is relatively concentrated and they have high bargaining power. Streaming media has a large investment in copyright content and pressure on profitability. In 19Q2, Spotify had a net loss of 76 million euros attributable to its parent company.
To B + To C, online + offline, the business model of digital music in China is becoming more and more diverse. In addition to paid subscriptions, digital albums, advertising and game joint transportation, has added business models such as copyright distribution, offline concerts, and variety show cooperation on the To B side; new live broadcasts, music hardware, peripheral and derivative product sales and Business models such as offline mini K and K song self-service stores. The expansion of the business model has promoted the improvement of the monetization ability of the content, and also promoted the breakthrough and innovation of the music industry, and the diversified monetization channels and scene pattern have been formed.
The music pan-entertainment market is huge, and the market size will exceed 100 billion in 2020, with a CAGR of 30.8% in the next 5 years. According to the statistics of iResearch, China's music pan-entertainment market developed rapidly in 2018, with a total scale of 56.1 billion yuan, a year-on-year increase of 70%. Businesses other than traditional music payment (paid membership + digital album/single) contributed 89%. In 2020, the total market size will exceed 100 billion. Music live streaming, online karaoke, and copyright distribution have become an important extension of the traditional online music business, creating a panoramic, three-dimensional, multi-channel pan-entertainment interactive scene for users while bringing more business possibilities.
The development of digital music in China lags behind that of foreign countries, and the payment rate is low. We believe that in the future, China's digital music business model will inevitably continue to develop towards diversification. In 2018, the payment rate of Spotify, the global digital music leader, reached 46%. The paid subscription rate of Tencent Music is only 4.2%. With the increase in per capita entertainment consumption expenditure, the expansion of paid music library and the acceleration of copyright protection process in traditional membership subscription business, the payment rate has huge room for growth, but it is difficult to rise to the level of Spotify; and ARPPU is not easy to compete in the short term due to fierce market competition. to make adjustments. The penetration rate of pan-entertainment business models such as online karaoke and live music is low, and MAU still has room for growth, but the growth rate has slowed down. The main driver of future growth will come from the increase in payment rate and ARPPU.
⚫ Game industry: or new subscription model
Global market: The console market is growing rapidly, and China may be affected by the freeze of the game version number in 2018. It may take second place. Newzoo predicts that in 2019, the global game market is expected to generate US$152.1 billion in revenue, a year-on-year increase of 9.6%. Among the three major categories, mobile game revenue will increase by 10.2% to US$68.5 billion, accounting for 45%; PC games will increase by 4% year-on-year to 35.7 billion US dollars, accounting for 23%; console games will grow 13.4% year-on-year to 47.9 billion US dollars.
The console game market is expected to reach a CAGR of 9.7% in the next 3 years, reaching $61.1 billion in 2022. The Switch "Nintendo Switch Lite", which will be launched in September this year, and the next-generation Xbox Project Scarlett and PlayStation 5, which will be released in 2020, will be the main factors driving the market growth. In addition, since 2015, China has been occupying the first place in the global game market. However, due to the impact of the 18-year game version number freeze, the inventory of version numbers is insufficient. Newzoo predicts that the United States will become the world's largest game market with a revenue of US$36.9 billion this year.
Battle Pass brings game business model innovation in 2019. According to gamma statistics, the actual sales revenue of the Chinese game market from January to June 2019 reached 116.3 billion, a year-on-year growth rate of 10.8%, of which the actual sales revenue of the mobile game market was 75.3 billion yuan, a year-on-year increase of 18.8% and a month-on-month increase of 6.7% , higher than the growth rate of the same period last year. During the same period, the number of game users in China was approximately 554 million, a year-on-year increase of 5.1%, and the growth rate hit a new high in the past three years (2017: 3.7%, 2018: 3.9%).
In the first quarter of the country, driven by the Battle Pass+ skin of " Glory of the King " and the revenue contribution of " Fantasy Westward Journey ", superimposed the strong promotion of " Peaceful Elite " and "Perfect World" in the second quarter. Market sales revenue still maintained a positive growth. "Battle Pass" is a new game mode created by overseas game companies in recent years, which rewards players according to their activity; at the same time, players can obtain their own activity rewards by purchasing "passes". The "Battle Pass" mechanism can effectively increase the activity of game players, and players with high spending power can get extra rewards, which also helps to increase the ARPU value.
"Glory of the King" launched a similar battle pass system "Glory Battle Token" at the end of 2018. We predict that Tencent will rely on this upgraded monetization model. The monthly revenue of "Honor of Kings" may have reached 1 billion US dollars. Popularization in more games is a trend of the future payment model, allowing players to have more choices.
High-quality content has become the core competitiveness. In addition to mobile games, 5G will boost the subscription model experience and usage habits of console games. Apple launched the Apple Arcade game subscription service in 2019, and Google Play also launched the subscription service Play Pass. According to IDC statistics, the overall market size of global console games in 2018 was US$53.3 billion, of which game subscription revenue was US$1.8 billion and maintained rapid growth. The GAGR of the relevant market is expected to reach 41% in the next seven years. We believe that when 5G drives cloud games When it develops well, the subscription model will become a trend, which will also drive the purchase volume and payment conversion rate.
2.3, SaaS: Leaders benefit from industry development + share concentration dividends
China's overall SaaS market continues to develop at a high speed. According to iResearch data, benefiting from the continuous growth of China's IT expenditure and the acceleration of cloudization, China's enterprise-level SaaS market reached 24.35 billion yuan in 2018, a year-on-year increase of 48%. It is also expected that China's enterprise-level SaaS market will reach 34.1 billion yuan Yuan, a year-on-year increase of 40%. Compared with the 210.6 billion domestic enterprise application software market in 2019, SaaS only accounts for 16%, and there is still huge room for growth.
The industry share is dispersed, and it is expected to further concentrate in 2020, which will benefit leading companies.
⚫ According to an IDC report, China's local enterprise-level application SaaS market reached US$1.9 billion in 2018, a year-on-year increase of 32%, which is eight times the growth rate of China's application software market and nearly twice the growth rate of the US enterprise-level application SaaS market. The two biggest parts are CRM (Customer Management, including Marketing Cloud) and ERM (Enterprise Resource Management, including ERP, HR, etc.).
⚫ The proportion of leading companies is still low, and they are expanding their share with the help of technology and mergers and acquisitions. China's enterprise-level SaaS market is still in its early stages of development, and its market share is extremely fragmented. In 2018, CR10 accounted for only 29.4% (35.5% in 2017). Among them, the company with the highest market share, Kingdee International, has a market share of only 5.3%. According to IDC data, Kingdee Cloud developed rapidly in the second half of 2018, with revenue increasing by 73%.The proportion of domestic SaaS ERM increased to 15.2%. At the same time, it became a shareholder of the leading domestic CRM company "Fanxiang Sales" and the HRM company "Xin Ren Xin Shi" to achieve a multi-directional layout.
2.4, transmission speed and traffic cost jumps, reshaping scene applications
The application upgrade trend is clear, and the importance of domestic Internet and communication leaders in scene innovation has increased. From the perspective of product essence, 5G increases the rate and reduces the unit traffic cost, which will drive the user penetration rate of existing scenarios such as high-definition video, VR live broadcast and games, and content subscription. China commercialized 4G in 2014, 2-3 years later than Europe and the United States, but the development of mobile Internet applications has caught up. In the
5G period, China has realized the first wave of mobile network commercialization. We judge that a leading Internet and communication company is expected to play a more important role in creating scenarios in its original advantageous fields; industry giants such as Tencent, Ali, Meituan, Huawei, and are expected to Combining 5G technology with its own business, it promotes the development of technologies such as voice interaction, augmented reality, and e-commerce display, and empowers emerging scenarios such as cloud games and smart cities.
⚫ cloud game
cloud game = cloud computing + game, the core is to improve the game experience of existing hardware. The cloud game is mainly based on cloud computing. The game program is mainly run on the server side, and the rendered game screen is compressed and sent to the user through the network. On the client side, the user's gaming device does not need high-end processors and graphics cards, but only needs basic video decompression capabilities, which reduces the demand for local hardware.
Global giants have entered cloud games one after another. In 2018, overseas giants Microsoft, Google, and EA successively joined cloud games. In 2019, Tencent, NetEase, Huawei, etc. also entered the game one after another, making efforts at different levels such as technology, IP and platform. Microsoft announced the xCloud project in October 2018; in 2019, Google announced Stadia, Google's first cloud gaming business (outside of the Google Play Store), and also announced the establishment of a development studio dedicated to creating exclusive content for the Stadia platform. Content; Sony's PlayStation Now is currently the most popular cloud gaming platform, with more than 700,000 users.
5G will promote the development of cloud games, expand the industrial value chain, and benefit cloud service providers and high-quality game development platforms. According to iHS forecast, the market size is expected to exceed US$500 million by the end of 2019, and will reach US$2.5 billion by the end of 2023. According to Newzoo's forecast, the potential users of cloud games will reach 124 million in 2022. We believe that cloud games can improve product experience and lower the equipment threshold for large-scale games, and new opportunities may emerge in the industry. On the other hand, cloud games have also expanded a new business model, from the traditional buyout system to a subscription system, which is good for cloud service providers and high-quality game development platforms.
⚫ VR/AR
5G makes the VR/AR experience smoother. The increase in 5G network speed will help solve the current pain point of VR/AR display delay. In December last year, South Korea's three major telecommunications providers, SK Telecom, KT and LG U+, simultaneously launched 5G service in some parts of South Korea. In 2Q19, the average monthly data usage of 5G users in South Korea was 24GB (4G: 9.5GB; 3G: 0.5GB ), while AR/VR services account for 20% of 5G network traffic, and the large bandwidth of 5G will help improve the resolution and bit rate of panoramic videos to achieve a better viewing experience.
Currently, the bit rate of 1080p video on mainstream video platforms is about 1~2Mbps, while that of VR panoramic video is 10 times that. Take "Henry" produced by Oculus Studios as an example (8 minutes and 42 seconds), the resolution is 5K, the file The size is 1.3GB, the code rate is about 20.8Mbps, and the high rate of 5G will effectively supportits development.
⚫ high-definition video
5G High speed is the core technology drive for next-generation video.
1) 19Q1 The head office issued the "Ultra HD Video Industry Development Action Plan (2019-2022)". It proposes to vigorously promote the development of the ultra-high-definition video industry and the application of related fields in accordance with the overall technical route of "4K first, taking into account 8K". At present, my country's ultra-high-definition video production capacity is in its infancy. More than 60% of domestic PGC companies produce less than 30 hours of 4K content per year, and only 5.4% of companies produce 100 hours of ultra-high-definition content per year.
2) Long and short videos: 5G promotes PGC+, content acquisition costs may be further reduced, content. According to Questmobile statistics, as of June 2019, my country's online video users have exceeded 964 million, and the duration of short videos is also growing explosively. , while optimizing image and sound delays. In addition, relying on technological innovation, content innovation, and business model innovation, it will effectively stimulate the development of the industry, and immersive content experience will gradually become the mainstream of people's consumption.
⚫ Intelligent voice: AI and 5G drive the development of voice interaction
After 5G is put into commercial use, part of the work of semantic analysis and understanding will be realized in the cloud. We are optimistic about the advantages of technology giants in the new generation of application ecology.
AI and 5G will bring about the development of voice interaction, first of all, the shipment of smart speakers.
⚫ AI brings voice interaction capabilities (such as voice recognition, semantic understanding, voice synthesis, etc.), while 5G infrastructure and terminals will bring more application scenarios for voice, and more IOT devices and the Internet of Things will communicate with each other. Capability upgrades will integrate application voice into the interactive environment.
⚫ At present, voice interaction AI has entered the critical period of "semantic recognition". As the "front-line product" of voice interaction, smart speakers are the first to achieve large-scale shipments, becoming the bridgehead to grab user access. Overseas giants Amazon, Google, and Apple have more layouts, and domestic Baidu, Alibaba, , and Xiaomi have more shipments.
⚫ According to Strategy Analytics data, global smart speaker shipments reached 86.2 million units (+169%) in 2018, and global shipments are expected to reach 148.8 million units (+73%) in 2019. The CR5 global shipments in 19Q2 are Amazon (6.6 million units, accounting for 22%), Google (5.6 million units, accounting for 19%), Baidu (4.7 million units, accounting for 15%), and Ali (4.3 million units, accounting for 15%). 14%) and Xiaomi (3.4 million units, 11%). In addition, according to IDC data, 11.3 million smart speakers were shipped in China in 19Q1, mainly from Alibaba, Baidu, and Xiaomi.
Amazon, Google, Apple and other giants are all making efforts in intelligent voice.
⚫ Amazon: 1) Offers a dedicated Amazon Lex service, a service for building conversational interfaces in any application using speech and text, offering advanced Automatic Speech Recognition (ASR) deep learning capabilities that convert speech to text , natively integrated with AWS. 2) At the Amazon Conference in September 2019, Amazon released 16 voice-related hardware smart products, all of which can be bound to Amazon's smart assistant Alexa, including Echo smart speakers, wireless headphones, ovens, etc.
⚫ Google: Google Assistant is Google's core mobile phone voice assistant, and released Google Home smart speakers equipped with GoogleAssistant. The newly released Pixel is equipped with a new generation of Google Assistant. Voice interaction can not only use the "hey Google / OK Google" password, squeeze the fuselage and screen gestures, but even use the Google Assistant by using the lift-to-wake function.t.
⚫ Apple: HomePod, Apple TV, Mac and other products are equipped with Siri voice control system. On February 16, 2019, Apple acquired PullString, a San Francisco voice application startup company, at a transaction price of less than 100 million US dollars to strengthen its own Voice assistant Siri.
predicts that voice interaction will run through mobile phones and wearable devices in the future. According to Garnter's forecast, global wearable device shipments will reach 225 million units by 2019, with a market size of $42 billion (+26%). We judge that voice will become the main interaction method for mobile phones and wearable devices in the future, including 1) operating smart watches, smart earphones and mobile phones by voice in the outdoor scene; 2) voice interaction connecting mobile phones and smart driving in the driving environment; 3) family In the scene, the mobile phone and smart home are controlled through voice interaction - in the way of voice interaction, a variety of smart terminals are combined around the mobile phone.
⚫ cloud computing: 5G commercialization increases data demand, and cloud computing grows rapidly
5G development brings increased data volume, which in turn expands demand for IaaS. Global public cloud IaaS maintained a rapid growth rate of 31% in 2018, while China's public cloud IaaS grew faster and is expected to grow by 51% in 2019. In the future, the proportion of IT expenditure in IaaS will gradually increase, and at the same time, the demand for PaaS and SaaS will develop. We like global and Chinese IaaS giants: Amazon, Microsoft, Alibaba.
5G development will increase IaaS demand. The development of 5G will bring about a rapid increase in data volume demand. The Internet of Things, intelligent driving, and cloud entertainment (cloud video, cloud games, etc.) will develop rapidly in 5G scenarios, bringing a large increase in cloud data volume, thereby accelerating the development of IaaS.
Global public cloud IaaS still maintains high growth. According to Gartner, the global public cloud market in 2018 was US$32.4 billion, a year-on-year increase of 31.3%. According to Canalys statistics, the global IaaS market (including public cloud and private cloud) in 19Q1 and 19Q2 grew by 39% and 38% respectively, and the growth rate slowed down slightly. We believe that technological improvement and the acceleration of cloudification in some regions are the core driving forces for the rapid growth of IaaS; driven by 5G in the future, it is expected that global IaaS will maintain high growth.
Amazon is still the largest IaaS company in the world, Microsoft Azure is growing rapidly.
1) According to Gartner statistics, Amazon AWS is the largest cloud computing company in the world. In 2018, the global public cloud IaaS accounted for 47.8% (down 1.7pct from 2017), and Microsoft ranked second, accounting for 15.5% (compared to In 2017, it rose by 2.9pct); in the 2019Q2 global public + private cloud IaaS, AWS accounted for 31.5%, and Microsoft accounted for 18.1%.
2) Rapid growth of Microsoft’s IaaS product Azure: In 19Q2, the revenue of Microsoft’s “Smart Cloud” category (mainly IaaS services other than Office365) increased by 19% year-on-year to US$114, and the revenue of Commercial cloud (mainly including Office 365 commercial, Azure, Dynamics 365) It grew 39% to $11 billion, with Azure growing 64% year-over-year. We believe that the core of Azure’s rapid growth lies in its ability to form a product matrix with other Microsoft products and bring about synergistic sales; we judge that the proportion of Microsoft’s cloud business will continue to increase in 2020.
IaaS market space: alternative data center systems, IT services, etc. IT spending (1.2 trillion in 2018U.S. dollars) for the vast majority.
⚫ Gartner estimates that global IT spending in 2018 will be approximately US$3.65 trillion. After excluding communication equipment and IDC equipment, software, data center systems, and IT services will total US$1.58 trillion.
⚫ We believe that cloud computing is a technological transformation of IDC hardware efficiency, so the main software expenditures in the future will choose public cloud SaaS, or choose new products on private cloud PaaS, and data center systems will choose IaaS; so now Most of IT services will be replaced by IaaS, PaaS and SaaS, and the scale of US$1.58 trillion can be regarded as a potential market in the cloud computing space.
⚫ Among them, the data center system and some IT service markets have IT expenditures of 200 billion and 1,185 billion US dollars in 2018, respectively.
IaaS industry chain can benefit: upstream IDC, downstream cloud services.
⚫ The IaaS industry chain includes "upstream IDC—midstream IaaS provider—downstream cloud service personnel". As the overall scale of IaaS increases, upstream IDC companies mainly include the three major operators, 21Vianet, Dr. Peng, and Sinnet and other companies; midstream IaaS providers include Alibaba, Tencent, Huawei, Kingsoft, etc.; downstream companies provide technical personnel for enterprise cloud and cloud operation and maintenance. IDC estimates that the size of China's IDC market will reach 154.1 billion yuan (YoY+27%) and 201.8 billion yuan (YoY+31%) in 2019 and 2020 respectively, and IDC equipment vendors will benefit from the increase in the number brought about by IaaS.
China's huge cloud computing market is yet to be discovered, and it is expected to remain in a period of rapid growth in 2020. According to iResearch's data, China's overall cloud service and IaaS market reached 102.6 billion yuan and 63.8 billion yuan respectively in 2018; in 2019, it is expected to be 149 billion yuan (YoY +45%) and 96.6 billion yuan (YoY +51%), In 2020, it will be 208.4 billion yuan (YoY +40%) and 137.4 billion yuan (YoY +42%), still in a period of rapid growth.
3. The recovery of the hardware segment industry, structural opportunities for domestic chips. In the quarter, global PC shipments increased by 4.7%/3.0% year-on-year. According to IDC data, the global PC market rebounded in 2Q19 and 3Q19, with shipments of 64.85/70.4 million units, a year-on-year increase of 4.7%/3.0%, which are the two highest year-on-year growth rates in the past four years. We believe that the recovery of the global PC market is mainly due to the tide of stocking up under the Sino-US trade friction and the demand for replacement of enterprise computers. Since Microsoft will stop supporting the Windows 7 system on January 14, 2020, some companies have taken this opportunity to update their original computers to new devices with Windows 10 pre-installed since 2018H2.
⚫ Server: Insufficient information demand from enterprise users, global server market shrinks in 2Q19
In 2019, the growth rate of IT procurement budgets of global leading enterprises will decline, but the business will grow quarter-on-quarter in the second half of the year. According to IDC data, in the second quarter of 2019, the global server market contracted for the first time in nine quarters, with a market size of approximately US$20 billion, a year-on-year decrease of 11.6%, and shipments of approximately 2.7 million units, a year-on-year decrease of 9.3%. In the past, the growth momentum of the server market mainly came from cloud + big data. In the future, the growth momentum will be switched to AI computing and the increase in data volume brought about by 5G.However, due to the fact that the new scenario has not yet been fully implemented, there is a gap between the current shipments and the market size.
⚫ Tablet PC: Jumbo-screen mobile phones and ultra-thin notebooks replace some tablets
Tablet PC shipments continue to decline, and there is a demand for ultra-thin/deformable notebooks to replace some traditional tablets. According to statistics from Strategy Analytics, global tablet shipments in the second quarter of 2019 were approximately 37.4 million units, a year-on-year decrease of 7.4%. The global tablet market has continued to decline since 2014, and we remain cautious about future demand expectations. Ultra-thin notebooks and deformable/detachable notebooks are gradually replacing tablets. IDC predicts that there will be a compound annual growth rate of 5.8% and 4.6% between 2019 and 2023, while traditional desktops, traditional notebooks and traditional tablets will decline to varying degrees .
⚫ Smartphone: wait for the 5G replacement demand in 2020
5G will suppress the replacement demand of 4G mobile phones in the early stage, and wait for the replacement demand driven by the price drop of 5G mobile phones. ’s global and Chinese smartphone shipments have gradually shrunk since 2017. According to the Ministry of Industry and Information Technology, China's smartphone shipments fell by 3.5%/2.8%/5.7% YoY in July/August/September 2019, respectively. According to the experience in the 4G period, in the early stage of commercialization of new communication technologies, due to the high price of equipment, the demand for replacement was suppressed.
We predict that when 5G mobile phones penetrate into the middle and low-end prices, the demand for replacement in the smartphone market will be more stimulated. It is estimated that in the first half of 2020, the price of most 5G mobile phones will be below 3,000 RMB, and in the second half of the year it will reach 3,000 RMB. Around 2000 yuan. Driven by the overall 5G replacement, we believe that smartphone shipments in 2020 are expected to reverse the decline and show mid-single-digit growth.
3.2. The scale of the semiconductor industry has stopped falling, and the localization has achieved remarkable results.
The sales of the semiconductor industry reversed and declined in 2018, and it is expected to stop falling in the second half of 2019. semiconductor performance has been under pressure since 2019 due to the sluggish end demand in the industry and the Sino-US trade frictions. The 2Q19 revenue of Philadelphia semiconductor components totaled US$74 billion, YoY -2.3%, QoQ +8.4%. Among them, Huawei's supply chain companies are more affected, and the overlay storage industry is in a downturn. Micron's Q2 revenue is -38.6% year-on-year.
2010-2018, the growth rate of the semiconductor market is about 0-10% (the growth rate in 2019 is about 1-2%), looks forward to 2019H2 and 2020, the current PC industry and the data center market are stabilizing, and it is expected that there will be smart With the tide of mobile phone replacement, 5G construction and increasing demand for AI, the market boom is expected to enter an upward cycle.
The leading wafer foundry is expected to be strong, the spring water is warm, and 5G+AI+encryption currency catalyzes growth in the second half of the year. In the first half of the year, the wafer foundry industry was affected by the downturn in the overall prosperity of the industry, and the revenue of the Q2 sector fell by 3.0% year-on-year. The global leader TSMC has an optimistic outlook for the second half of the year in its 2Q19 conference, and raised its annual CAPEX to more than US$11 billion. In the second half of the year, affected by 5G, AI and cryptocurrency, the industry trend is expected to improve.
The semiconductor industry is still on the left side of the cycle, and terminal demand remains low despite the macroeconomic downturn and the absence of new consumption scenarios. Production capacity supply continues to shrink under the continuous fermentation of factors such as Sino-US trade frictions and Japan-Korea trade frictions. If the 5G construction is in line with expectations at the end of 2019 or early next year, terminal replacement is expected to become an inflection point in the cycle, driving up demand, and the semiconductor industry is expected to reach a cycle low in the second half of the year.
Storage prices have rebounded in the short term due to the impact of the Japan and South Korea incidents. In the second half of the year, demand is expected to pick up driven by 5G, and prices are expected to stop falling. storage prices driven by smartphone demand in 2016 and 2017 dataAfter the impact of strong growth in the center, it turned down in late 2017 as the price of Bitcoin peaked. Affected by 5G construction and terminal replacement, the demand side is expected to pick up in 2020, and storage prices are expected to stop falling.
China's technological breakthrough will increase the proportion of domestic production, and domestic substitution is still the main axis of current semiconductor investment. The country vigorously supports the development of the integrated circuit industry, promulgating a number of policies aimed at breaking barriers in technology, capital, talent, and certification, and guiding the transfer of the circuit industry to China. In recent years, capital expenditures have increased significantly, surpassing the sum of Japan and Europe in 2018.
3.3. Mobile phone upgrades focus on communication and optics. In the long run, voice interaction and AI
⚫ frequency bands increase and require upgrades, and the value of a single device doubles.
5G mobile phone frequency bands increase, and the number and value of single mobile phone RF devices increase. The number of frequency bands supported by 4G smartphones is already close to 40, but individual radio frequency devices can usually multiplex multiple frequency bands; in the 5G era, whether it is Sub 6GHz or millimeter wave, the frequency difference between the new frequency band and the original frequency band is large. It must be supported by different radio frequency devices, so the number of built-in PAs, filters, switches, etc. in a single mobile phone will increase.
The CAGR of the mobile phone RF front-end market in 2019-24 is expected to reach 16%. We assume that the large-scale commercial use of 5G in 2020 will gradually drive the demand for smartphone replacement. In 2024, smartphone shipments are expected to reach 1.49 billion units, of which 60% are 5G phones and 40% are 4G phones. On this basis, we predict that the global mobile phone RF front-end market will reach US$24 billion in 2024, with a CAGR of 16.1% in 2019-24.
⚫ Antennas: Double the number and increase the manufacturing difficulty
5G adopts MIMO technology, and the number of mobile phone antennas will double compared with the 4G era. 5G uses beamforming technology and must use a multi-antenna array system (Massive MIMO). MIMO technology means that based on multiple antennas, multiple communication channels can be established between the base station and the mobile phone, and each pair of antennas transmits one channel of information independently, and the bandwidth and rate increase by converging these channels. Now 4G mobile phones are mostly 2×2, and 5G is at least 4×4, which is doubled compared to the existing mainstream antennas based on MIMO 2×2 technology. For example, Huawei Mate30 5G integrates 21 antennas, 14 of which are used for 5G connections. The antenna industry is about to usher in a stage of rapid growth. The material of
has been upgraded, and the value of a stand-alone antenna in the 5G era is expected to increase significantly. The transmission reliability of traditional PI flexible board antenna is low, and the transmission loss in the high frequency band is serious, and it will face the need for upgrading in the future. In the early stage of 5G, MPI antennas are expected to be widely used in the transition stage from 4G to 5G due to their cost-effective advantages, and mid-to-low-end 5G mobile phones will use MPI or PI solutions; while in the millimeter wave stage in the later stage of 5G, LCP antennas are expected to be widely used due to their excellent high-frequency performance. , good flexibility, is expected to become the mainstream choice. It is understood that the value of a single LCP antenna for iPhone X is between US$4 and US$5, and the total value of two is US$8-10, while the value of a single independent PI antenna for iPhone 7 is about US$0.4, from PI antenna to LCP antenna unit The value increase is about 20 times. The MPI solution is an improved version of the PI solution, so the value of a single machine will be higher than that of the traditional PI.
5G antenna raw materials are mainly supplied by Japanese manufacturers, and Chinese and Taiwan-funded are mainly in the processing link. The industrial chain of the 5G antenna is copper foil, LCP/MPI, flexible board processing, and then antenna modules. Among them, the value of the flexible board accounted for as much as 70%, and the module link accounted for only 30%. LCP raw material suppliers are mainly Japanese manufacturers. Among them, Murata is the only manufacturer that has achieved an industrial chain connection. Taking Apple's supply chain as an example, Murata (6981.TYO) has achieved full coverage from raw materials to modules for the supply of iPhone LCP antennas. Major suppliers of LCP resin/film include Nippon Polyplastics, Sumitomo Chemical, and Kuraray. Major LCP-FCCL suppliers include Panasonic, Dongshan Precision (002384.SZ). Major LCP flexible board processing companies include Jialianyi (6153.TW) and Zhending (4958.TW). Antenna module companies include Amphenol (APH.N), Luxshare Precision (002475.SZ) and Xinwei Communication (300136.SZ)
⚫ baseband: the core component that supports 5G, which is expected to penetrate into low-end and mid-range phones next year The research and development of the
5G baseband chip is extremely difficult. At present, there are only six major manufacturers competing on the same stage. After more than 30 years of development of mobile phone communication chips, there are dozens of original manufacturers, and now there are only five major manufacturers of Qualcomm , MediaTek , Samsung Electronics , Huawei HiSilicon, and Ziguang Zhanrui. . In the 5G era, Qualcomm was the first manufacturer to successfully develop 5G baseband chips, and then Huawei, MediaTek, Samsung, etc. successively launched 5G baseband products. Intel also launched samples of 5G mobile phone baseband chips in 2018. In July 2019, Apple acquired Intel's baseband business unit and is expected to continue the research and development of Apple's own 5G baseband chips.
The 5G baseband chips of MediaTek and UNISOC are expected to be applied to mid-range models in 2020, further increasing the penetration rate of 5G. MediaTek’s first 5G baseband chip Helio M70 will be manufactured using TSMC’s 7nm process. It is a 5G multi-mode integrated baseband. It is expected to be mass-produced in Q1 of 2020 and positioned as a sub-flagship mobile phone. In addition, Ziguang Zhanrui released the first 5G baseband chip in February 2019, which can support SA and NSA networks in the Sub-6GHz frequency band. With the introduction of low-cost 5G baseband chips, more mid-range models are expected to launch 5G versions.
⚫ Optics: The camera performance of mobile phones is on par with micro-single cameras, and the camera upgrade is not limited to
The rear camera is continuously upgraded: ultra-high pixel, wide-angle, periscope, 3D sensing and other features. The upgrade trend of smartphones in recent years is most obvious in shooting performance, including new sensing functions such as multi-camera, structured light and ToF. In the future, 1) The pixels of mobile phone cameras will continue to upgrade, and next year the mainstream will be 48M, 52M, 64M, and even 100 million; 2) The periscope solution is expected to penetrate down to mid-range models; 3) The penetration rate of ToF is expected to increase in the future; 4 ) The penetration of ultra-wide-angle lenses has been improved; 5) The flagship model may add a new lens to enhance video shooting performance. 6) Screen forms such as full screen, notch screen, and punch-hole screen have higher requirements for the size of the front camera module.
In the first half of 2019, the shipments and revenue growth of optical components companies were impressive. In the first half of 2019, mobile phone lens shipments: Sunny (+37.8%); mobile phone camera module shipments: Sunny (+20.7%), Qiu Titanium (+77.6%); optical (lens) business revenue : Sunny (+42.1%), Largan (+13.1%), Yujingguang (-6.7%); optoelectronic/module business revenue: Sunny (+27.1%), OFILM (+41.7%), Qiu titanium (51.8%).
⚫ casing: non-metal casings will be more widely used, and "glass + metal middle frame" will be the mainstream solution.
Glass as a casing material has no electromagnetic shielding effect and will be more widely used in the 5G era. 5G has higher requirements on the signal transmission of smartphones. It will be a major trend in the industry to replace metal materials with non-metallic materials such as glass and ceramics without electromagnetic shielding effect as casings. Compared with ceramics, the glass material technology is more mature, and the cost has advantages. Compared with composite panels, the texture of glass is better. The "glass back cover + metal middle frame" solution will become the mainstream solution in the 5G era.
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(source of the report: Industrial Securities)
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